MIDF banking on revamp to boost returns

Kuala Lumpur: Malaysian Industrial Development Finance Bhd (MIDF) is aiming to achieve double-digit returns on equity (RoE) in the next five years, helped by a restructuring exercise.

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The revamp, according to group managing director Datuk Mohd Najib Abdullah, has primed the organisation to become a trusted financial adviser with a unique cradle-to-maturity approach. He said MIDF's revamp of its business model has put it in a stronger position to achieve its objective. "This involves changes in how each of MIDF's core business operates," he told Business Times in an interview. MIDF was established in March 1960 to ensure access to financing for manufacturing-based small and medium enterprises (SMEs). Today, the group is a financial services provider in three core areas, namely investment banking, asset management and development finance. Under the revamp, the focus of its development finance division was reverted to its original intent, which is to assist the government in restructuring the economy, while targeting specific sectors of the economy. This entails a move towards assisting SMEs in the services sector and assisting companies in certain core sectors as in the New Economic Model, Najib said. MIDF Asset Management Bhd (MIDF Amanah) now offers a full range of products, ranging from unit trusts to corporate asset management. MIDF's investment banking division, under MIDF Amanah Investment Bank Bhd (MIDF Investment), has been revamped into a niche, value-accretive and sustainable provider of services with targeted and specialised offerings. Currently, the investment banking division is the major contributor to the group's business, generating some 70 per cent of MIDF's revenue. "Our strategy is that we want to achieve acceptable returns on equity and returns on investment. It's not so much on the top line numbers, but being focused on creating value for our shareholders," Najib said. According to him, MIDF's three core businesses are very much intertwined, offering longstanding relationships with clients in a cradle-to-maturity lifecycle. He said development of finance division provides a starting point for SMEs, and as they grow and progress, they can tap into the services provided by MIDF Investment. As these companies expand further, they could then engage MIDF Amanah for services such as corporate asset management. "Some of our clients have been with us for many generations," he said, adding that many of MIDF's SME clients are now publicly-listed companies. Besides financial services, MIDF also provides advisory services to clients to assist in their corporate and debt structuring. "We don't intend to compete with privately-owned financial institutions as we have a niche, a space to operate for which we can create value to our various stakeholders," he said. Najib also said that the global economic crisis presented some challenges to the group in terms of portfolio management. "But, with the improved economic environment, local companies have been able to strengthen their operations and have experienced a positive turnaround in business. Problem loans have improved significantly," he added.